Charlotte’s Web Holdings Stock Down after Earnings

Charlotte’s Web Holdings stock (CWBHF)(CWEB) was down 6.6% yesterday after the company reported lower-than-expected Q2 earning results. It missed both top- and bottom-line estimates, dragging the stock down. Let’s take a closer look at the disappointing performance.

Charlotte’s Web Holdings’ Q2 results

For Q2 of fiscal 2019, Charlotte’s Web reported a 45% year-over-year increase in revenue to $25.02 million. However, it missed analysts’ estimates of $27.8 million. Earnings per share of $0.02 also came in below analysts’ estimates of $0.04.

The company saw an increase in retail uptake for its natural health channel. Consumer companies CVS Health Corp (CVS) and Kroger (KR) are selling Charlotte’s Web products. Around 8,000 retail locations carry CWEB products today. To enhance its product portfolio, the company also increased its total acres planted for 2019 to 862, a 187% increase. It harvested close to 675,000 pounds of hemp. 

Charlotte’s Web Holdings also introduced new products in the second quarter. These additions include hemp extract–infused CBD gummies in three flavors and a 12-SKU pet product line 

Management’s view of the results

Deanie ElsnerCharlotte’s Web Holdings CEO, said, “We have been experiencing increased sales through both our e-commerce and retail sales channels. Top tier mass retailers are entering the market as several national grocery and drugstore brands have announced their CBD plans. The majority of these are now carrying Charlotte’s Web products. ” Management also stated that broader demand for CBD-based products drove the sales increase.

Leadership changes at Charlotte’s Web Holdings

Charlotte’s Web Holdings said that it filled top executive positions during the second quarter. Tony True joined as chief customer officer to build and lead a CPG sales organization. Paul Lanham also joined, as chief information officer, while Russ Hammer stepped in as CFO. 

Price coverage 

After the results came out, Benchmark cut its target price for the stock by $3 to $22. Meanwhile, Eight Capital raised its target price to 31 Canadian dollars from 25. Out of eight analysts covering the stock, two recommended a “strong buy” for the stock for the next 12 months. Six rated it a “buy.”

The target price stand at 32.33 Canadian, which represents 26% upside potential for the stock compared to its current trading price. CWEB stock closed at 10.15 on Friday.

Charlotte’s Web Holdings versus peer stocks

Charlotte’s Web Holdings stock has gained 68.5% year-to-date. Meanwhile, peers Aurora Cannabis (ACB), Cronos (CRON), and Aphria (APHA) have gained 15.3%, 12.1%, and 0.25%, respectively.

Many cannabis stocks were affected yesterday after Canopy Growth reported unimpressive results. Canopy fell 14.3%. Aurora Cannabis’s (ACB), Cronos (CRON), and Aphria (APHA) closed with losses of 5.7%, 8.8%, and 7.6%.

Other earnings in the cannabis industry

Canopy Growth (CGC)(WEED) reported its Q1 of fiscal 2020 results on August 14. Check out Canopy Growth Earnings Impacted the Cannabis Sector to see what went wrong in the quarter.

Despite the lackluster results, CNBC Mad Money host Jim Cramer still recommends Canopy Growth and thinks cannabis is a hot sector. See Why Jim Cramer Favors CRON and CGC and Jim Cramer Thinks Cannabis Is Back in Action.

Aurora Cannabis (ACB) reports its Q4 of 2019 results next month. See Aurora Cannabis Is Upsizing Its Secured Credit Facility. Tilray (TLRY) reported its Q2 results on August 13 after the markets closed. For Tilray’s target price and valuation, check out Tilray: Target Price and Valuation Multiple.

Cresco Labs is slated to report its Q2 2019 results after the market closes. Its earnings call takes place at 5 PM ET on August 21. Stay tuned with Market Realist to learn more about Cresco’s results.